45th Congress of the European Regional Science Association: "Land Use and Water Management in a Sustainable Network Society", 23-27 August 2005, Amsterdam, The Netherlands

Abstract:

We investigate the effect of subsidies and levies on the behaviour of households on the Dutch housing market. Our primary interest lies in the effect on the tenure choice and on the levels of housing consumption for the whole population. The housing consumption level is not a priori defined. We chose a one-dimensional housing concept. Differences between market values may reflect differences in house characteristics, but may also stem from differences between markets. To find the 'true' levels of housing, we break up market values of houses into price and quantity, resulting in regional price indices for owner-occupied and rented houses separately. After correction for actual subsidies and levies (for the current tenure choice) and for imputed values (for the alternative choice), households face individually varying prices. We use a survey data set of about 60,000 Dutch households. Behaviour is estimated using a utility maximising consumption model with equations for both tenure choice and the consumption levels for owning respectively renting a house. The relation between choice and quantity is taken into account. The resulting price and income effects are in line with standard theory. Higher income gives a tendency towards owning rather than renting.